Reykjavik is famously expensive, although it’s gotten a bit better since the 2008 currency crisis. Still, nearly everything you will want to do will cost more than almost anywhere else in Europe, or on the planet for that matter.
Hotels in Reykjavik can actually be reasonably priced if you shop early to find a good deal, or if you come outside of the main tourist season in summer. Shared bathrooms are pretty much the norm all over Iceland in the budget category, and you rarely even get a sink in the room, so get used to that. There are a few hostels in Reykjavik as well, which can keep from exploding your budget. Take note of the fact that most of the cheaper hotels and hostels are actually some distance from the city proper, so they may not be ideal even if they are cheap.
Food is quite expensive, as is any kind of alcohol. Think about the duty free shop on your way in and start off in your hotel room.
Most people only stay in the city for a day or two and then they circle the island in a bus or a rental car. Once outside Reykjavik prices do ease a bit, but the whole experience is so amazing that it’s hard to feel bad if you can afford it somehow.
